Holt-Winters is a model of time series behavior.

Forecasting always requires a model, and Holt-Winters

is a way to model three aspects of the time series: a typical value (average), a slope (trend) over time,
and a cyclical repeating pattern (seasonality). Holt-Winters uses exponential smoothing to encode lots of
values from the past and use them to predict “typical” values for the present and future. If you’re not
familiar with exponential smoothing, we wrote a previous post about it,

The three aspects of the time series behavior—value, trend, and seasonality—are expressed as three
types of exponential smoothing, so Holt-Winters is called triple exponential smoothing. The model
predicts a current or future value by computing the combined effects of these three influences. The
model requires several parameters: one for each smoothing (ɑ, β, γ), the length of a season, and the
number of periods in a season.

Seasonality can be confusing. A season is a fixed length of time that contains the full repetition. You
might think your data repeats daily (there’s a peak at 2pm every day), but if the weekend has different
behavior (there’s no peak at 2pm on Sunday) then your season is really a week, not a day. Within the
season, there are periods, which is the granularity of prediction. If you want to model a value for every
hour of every day within a week, your season is 168 hours long and your period is 1 hour.

The hardest parts of Holt-Winters forecasting are understanding how the model works, and choosing
good parameters. To tackle the first, we’ll do Holt-Winters “by hand.”

Holt-Winter by Hand

The usual way to explain Holt-Winters is by showing a bunch of complicated equations with Greek
letters and subscripts. We’ll skip the math and show how it works, which is a lot simpler.